Coase-Sandor Working Paper Series in Law and Economics

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Working Paper

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Richard Epstein’s Simple Rules for a Complex World1 is true to its title and to the author’s demonstrated genius over a long career. It is a libertarian-oriented enterprise in that it requires the reader to share in the belief that government programs are often wasteful and subject to unattractive interest group pressures and corrupt bureaucracies. More generally, Simple Rules is framed against a background in which the reader must share the libertarian view that individuals can and should be trusted to look after themselves and to make their own choices. Epstein likes “simple” rules; these include strict liability, a flat tax, fee simple, and so forth. He argues that more complexity invites errors and corruption, and arguments for complexity undervalue individuals’ ability to bargain and otherwise fend for themselves. People know what is good for them far more than lawmakers. Anyone who does not share these fundamental views might be frustrated when reading this important book, unless perhaps the belief in redistribution and market failures is so great that one is willing to set aside the enormous costs of government failure. In any event, an insightful and friendly (and terrific) critique of the book has already been written by John Harrison, who thinks of Epstein’s book as a myth: What role should law play if the world were as Epstein (and perhaps Harrison and others among us) wishes it to be?2 As such, this Essay is neither a review nor a reaction, but instead offers the following two ideas that are stimulated by the book. First, “simple rules” is something of a misnomer; simplicity is in the eye of the beholder. Second, and more significant, the book offers an opportunity to think about the division of labor between private markets and government activity. Thus, Part I of this Essay raises doubts about the idea of simplicity in rulemaking. It is important to take enforcement costs into account when making rules and to see that there is often a trade-off between these costs and the goal of encouraging social efficiency on the part of those subject to these rules. Complexity does often raise administrative costs, but it can also encourage efficient behavior. Part II then takes us in a new direction as it compares the complexity of markets to that of law. It asks why we should yearn for simple rules where law is concerned if the private market often chooses and demonstrates the advantages of complexity. Various answers to this question cast some light on the choice between simple and complex rules.

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